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Swipe Fee Reform Foes Take New Approach

WASHINGTON, D.C. -- As retailers prepare for the U.S. Senate to take up debate on a bill to delay swipe fee reform -- a debate that's expected to begin any day now -- multiple reports indicate that the bill backers are ceding some ground.

Bloomberg reported today that the Federal Reserve rule capping debit card swipe fees set by Visa and MasterCard would be delayed at least six months under a revised plan being crafted in the U.S. Senate.

Senators Jon Tester, a Montana Democrat, and Bob Corker, a Tennessee Republican -- who originally pushed for a two-year postponement and then revised it down to 15 months -- are among lawmakers working on a compromise that would let regulators study the issue before determining whether to write new rules, according to two people with direct knowledge of the talks. The caps, mandated by the Dodd-Frank Act, are set to take effect July 21.

The Fed would get more months if the study shows that the current proposal would hurt consumers or fail to exempt banks with less than $10 billion in assets, Bloomberg's sources said.

In December, the Fed proposed capping the swipe fees, also known as interchange fees, at 12 cents a transaction, replacing a formula that now averages 1.14 percent of the purchase price.

Tester, who in March first introduced a bill calling for a delay in any movement on swipe fee reform, is expected to present more specific language on the new delay proposal.

"For several months, Senator Tester and Senator Corker have been working with colleagues on a bill to prevent consumers and rural banks from experiencing serious harm as a result of the interchange amendment," Andrea Helling, Tester's spokeswoman, said in an e-mail. "The conversations continue to progress, and we feel confident that in the next 24 hours we will have a bill that can become law."

In an article posted on TheHill.com, Corker went a step further in discussing the changes. While acknowledging that reform is inevitable, Corker said Congress should direct regulators to take into account the fixed, as well as the incremental costs of the banking industry when capping debit card fees. Corker added that he and Tester have made several changes to their proposal "in a way to bring people together."

"What it really does, the essence of it is, it directs the Fed, instead of setting prices on debit cards based solely on the incremental costs of the transaction, it allows them to consider all costs, both fixed and incremental, something that anybody in this body that happened to be in business certainly would want to be the case," Corker said.

This hot-button issue has been coming to a head for months. In December, after years of the retail industry pushing for reform, the Federal Reserve proposed a cap on debit card fees retailers can charge customers at 12 cents per transaction. The Fed then began a 60-day comment period on the proposal.

A final vote on the rules was set for April 21, with implementation slated for July 21. However, the April 21 deadline came and went as Fed Chairman Ben Bernanke explained that the agency had thousands of comments to review. At that time, he said the Fed would issue its rules by the July 21 date.

Now as that date fast approaches, the retailer community, big banks and the credit card companies -- on opposing sides of the issue -- have dug in for a fight. As CSNews Online reported last week, NACS -- the Association for Convenience & Petroleum Retailing -- urged its members to contact their elected officials and let them know how they feel about the issue. In addition, the National Retail Federation launched a radio ad campaign in several key states asking lawmakers to vote against any delay bill.